Social Security: 2020 Updates to Keep in Mind

Ken Weingarten |
Categories
Social Security
Retirement Planning

For working and retired individuals, Social Security is a major piece of the retirement puzzle. This stream of guaranteed income is an ever-changing program that is tweaked annually to ensure that one can continue to rely on the benefits being a staple of financial support. On an annual basis, the following are some of the changes that are made:

  • Cost-of-Living Adjustment (COLA) for current recipients of Social Security benefits:
    • For 2020 this number is 1.6%
  • Maximum monthly benefits that Social Security will pay out.
    • For 2020, these numbers are:
      • $2,265/mo. for someone who files at age 62
      • $3,011/mo. for someone who files at Full Retirement Age
      • $3,790/mo. for someone who files at age 70
  • Wage base that is subject to Social Security payroll tax.
    • For 2020, earnings up to $137,700 will be taxed at a combined 12.4%. Half of that, or 6.2% from the employer portion, and 6.2% from the employee portion. (Earnings above this level are not subject to Social Security tax but are subject to Medicare tax.) Self-employed individuals pay the full 12.4% but get the benefit a deduction for half of this amount on their tax return.
  • Minimum amount of earnings it takes to earn a Social Security credit for the purposes of qualifying and calculating one’s benefit.
    • For 2020, an individual will receive one credit for each $1,410 of earnings, up to the maximum of four credits per year.
    • A worker needs a total of 40 credits to qualify for Social Security benefits
  • Full Retirement Age (FRA) for those turning 62 in 2020: Below is chart illustrating the FRA based on one’s birth year.

While there are other annual updates to Social Security, the aforementioned points typically affect the majority of working and retired individuals. It is important to understand Social Security’s annual updates as they are just as important as any other piece in one’s financial plan.

Weingarten Associates is an independent, fee-only Registered Investment Advisor in Lawrenceville, New Jersey serving Princeton, NJ as well as the Greater Mercer County/Bucks County region. We make a difference in the lives of our clients by providing them with exceptional financial planning, investment management, and tax advice.